ORIGINAL '\\\ Pennsylvania Public Utility Commission C ">"* O P.O
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COMMONWEALTH OF PENNSYLVANIA IN REPLY PLEASE PENNSYLVANIA REFER TO OUR FILE PENNSYLVANIA PUBLIC UTILITY COMMISSION P.O. BOX 3265, HARRISBURG, PA 17105-3265 BP8# 2201861 May 16, 2013 tn r-O ^5? o Rosemary Chiavetta, Secretary ORIGINAL '\\\ Pennsylvania Public Utility Commission C ">"* o P.O. Box 3265 Hamsburg, PA 17105-3265 29: fo C Re: Pennsylvania Public Utility Commission, Law Bureau i^i —i Prosecutory Staff vs. MXenergy Electric Inc.; Docket No. M-2012-2201861 »• * Dear Ms. Chiavetta: Enclosed for filing is the original copy ofthe Settlement Agreement in the above- captioned proceeding. As evidence by the enclosed certificate of service, all parties have been served as indicated. If you have any further questions regarding this matter, please contact me at 717-783-3459. Sincerely, Terrence J. Buda Assistant Counsel Enclosures cc: As per Certificate ofService Karen Oill Moury, Director of Regulatory Operations (cover letter only) Robert F. Young, Deputy Chief Counsel (cover letter only) PENNSYLVANIA PUBLIC UTILITY COMMISSION,^ LAW BUREAU PROSECUTORY STAFF o tn MXENERGY ELECTRIC INC. T^?1 ^ SETTLEMENT AGREEMENT J ' ^ V ) I. Introduction 1. The Parties to this Settlement Agreement (Agreement) are the Pennsylvania Public Utility Commission's (Commission) Law Bureau Prosecutory Staff (Prosecutory Staff), P.O. Box 3265, Harrisburg, PA 17105-3265, and MXenergy Electric Inc. (MXenergy or Company), 10010 Junction Drive, Suite 104-5, Annapolis Junction, MD 20701-1180. MXenergy is a licensed electric generation supplier (EGS) in Pennsylvania providing these services to residential and small business customers.1 2. This matter concerns an informal investigation regarding MXenergy's compliance with the Public Utility Code and Commission regulations. As a result of negotiations, the Parties have agreed to resolve this matter as encouraged by the Commission's policy to promote settlements. See 52 Pa. Code § 5.231. The duly authorized Parties executing this Agreement agree to the settlement terms set forth herein and urge the Commission to approve them as being in the public interest. 1 On July 1, 2011, Constellation Energy Resources, LLC ("CER") acquired MXenergy's parent company, MX Holdings, Inc. Subsequent to MXenergy's acquisition by CER, the Company was rebranded to Constellation Energy Power Choice, Inc. See May 30, 2012 Notice of Update Application Information filed with the Commission at Docket A-1I0I68. Therefore, Constellation Energy Power Choice, Inc. is the corporate entity bound by the Settlement Agreement. However, for purposes of this Agreement, we shall continue to use the name MXenergy. II. Prosecutory Staff Investigation 3. On November 4, 2010, Prosecutory Staff initiated an informal investigation of MXenergy focusing on the Company's marketing of its residential electric generation supplier services and specifically its door-to-door sales practices. This action was taken as a result of a referral by the Office of Competitive Market Oversight, based on information that Gateway Energy Services Corporation (Gateway) had filed a federal lawsuit against MXenergy. In that suit, Gateway alleged, inter alia, that certain third party independent contractors representing MXenergy engaged in "slamming," with the intent to confuse and deceive four of Gateway's existing cusiomers into terminating their existing contracts with Gateway and entering into new contracts with MXenergy. The lawsuit was resolved by Consent Order dated November 18, 2010. MXenergy in the Consent Order denied all wrong doing, but agreed to refrain from altering, writing on, or changing any contracts or enrollment forms bearing Gateway's name or trademark. All litigation expenses incurred by the parties in the litigation were borne by each party, and all parties' requests for additional costs were waived. A complete and detailed summary of Prosecutory Staffs investigation is set forth in Attachment A to this Agreement and incorporated herein by reference. 4. Throughout the entire investigatory process, Prosecutory Staff and MXenergy remained active in informal discovery and continued to explore the possibility of resolving this investigation, which culminated in this Settlement Agreement. During the discovery process, MXenergy complied with the Prosecutory Staffs requests by, among other things, providing to Prosecutory Staff substantial amounts of information and documentation. Throughout the investigation, MXenergy and the Prosecutory Staff likewise convened meetings and maintained ongoing communication. 5. Prosecutory Staff acknowledges that MXenergy has cooperated fully with this investigation. 6. The Parties initially filed a Settlement Agreement on January 6, 2012. On May 3, 2012, the Commission issued an Opinion and Order rejecting the Agreement and referring the matter back to Law Bureau for any further action deemed warranted pursuant to 52 Pa. Code § 3.113(b). The Commission concluded that a $500 per- customer penalty, even when combined with corrective action, was not enough to remedy this situation or to deter potential future violations of the Public Utility Code or Commission regulations by an EGS. Furthennore, the Commission determined that it was not clear which corporate entity, i.e., MXenergy, an MXenergy affiliate or the parent company, was impacted by the Agreement. The Parties have revised the Settlement Agreement to address these issues. Specifically, the civil penalty was increased to $1,000 per violation and Constellation Energy Power Choice, Inc. is identified as the entity bound by this Agreement. III. Settlement Terms 7. Prosecutory Staff and MXenergy representatives conducted additional settlement negotiations concerning the informal investigation and the Commission's May 3, 2012 Opinion and Order, and these negotiations culminated in this Agreement. 8. MXenergy and Prosecutory Staff desire to settle fully and completely and without further litigation all matters related to MXenergy's electric generation service up to and including the date that this Settlement Agreement is signed by the Parties. 9. Nothing contained herein may be taken as, or construed to be, an admission or confession of any violation of law, or any other matter of fact or law. 10. Although MXenergy disputes Prosecutory Staffs allegations and assertion of purported violations, any liability or wrongdoing, or any ofthe findings of Prosecutory Staffs investigation, MXenergy fully recognizes the seriousness of these allegations and the need to prevent violations such as those alleged by Prosecutory Staff. 11. Prosecutory Staff and MXenergy recognize the benefits of amicably resolving these differences. In recognition of the cost of further litigation, the time and expense of holding a hearing, and the merits of the Parties' respective positions, the Parties have entered into negotiations and have agreed to settle the investigation according to the terms and conditions set forth herein. 12. Prosecutory Staff and MXenergy, intending to be legally bound and for consideration given, desire to conclude this informal investigation and agree to stipulate as to the following terms: a) Solely for purposes of this Agreement, Prosecutory Staff alleges MXenergy switched 22 consumers to its generation service without proper authorization in violation of 52 Pa. Code § 57.173. b) MXenergy agrees to pay a Settlement in the amount of $22,000 - i.e., $1,000 per alleged violation - to the Commonwealth pursuant to Section 3301 ofthe Public Utility Code, to resolve, through this Agreement, the allegations raised by Prosecutory Staffs investigation. MXenergy shall remit the entire amount within 30 days from the date that the Commission approves this Agreement. The check shall be made payable to the "Commonwealth of Pennsylvania" and addressed to "Rosemary Chiavetta, Secretary, Pennsylvania Public Utility Commission, P.O. Box 3265, Harrisburg, PA 17105-3265." c) The Company acknowledges that it is responsible for violations of the Commission's regulations resulting from unauthorized conduct and activities of independent representatives, contractors and vendors who, though not employees of MXenergy, market and/or assist in providing its services pursuant to contractual agreements. d) In addition, to the extent that MXenergy has not done so already, the Company shall take the following corrective action: 1) MXenergy or its Direct Marketing Organizations (DMOs) will conduct background checks on all potential independent contractors or agents. MXenergy agrees to provide the background check criteria to the Commission's Bureau of Consumer Services (BCS), Manager of the Field Review Unit (Commission Staff), when requested but no later than ten (10) days after the Settlement Agreement is signed by both parties. 2) MXenergy will provide a single point of contact to 5 Commission Staff for resolution of consumer inquiries and/or complaints received by the BCS and will respond to all consumer inquiries and complaints in accordance with BCS requirements, including by providing all information regarding the customer and complaint as requested by Commission Staff, and providing a copy of the contract and any audio recordings ofthe verification call related to such complaint. MXenergy will also update the Commission Staff on a quarterly basis regarding the resolution by the Company of any such complaint. 3) MXenergy will provide an extended cancellation period of up to 30 days after the issuance of the first bill for the Company's electric generation supply service during which the customer will